Links galore

Cost control

The problem of costs threatens to undo the expansion in coverage, both in Massachussets and on the national level. As I said to Meredith, there are two broad approaches to this problem.

The first would use consumer choice to drive down the cost of health care much as it does in other areas. The way to get there is to end both the tax advantage for employer sponsored health care plans and state regulation of health insurance. You get consumer choice by getting people to buy their own insurance, so they bear the costs more directly and, accordingly, become more sensitive to prices than they are now. The problem is that the cost of underwriting health insurance in the individual market is much higher than the cost of underwriting group insurance plans, such as those available through employers. So a large part of the savings would be eaten up by the cost of underwriting insurance. There are also good reasons for doubting that consumer choice could work well in health care: see Arrow’s article, for example.

The second approach to controlling costs would be to centralize health care purchasing, using the power of monopsony to squeeze the providers. This is the way the rest of the world controls costs. It works: consumers in the US pay much higher costs for any given health service than people in other countries do without significantly better access to those services or better outcomes. Here’s just the most recent report to this effect.

Ah, but can the public system control costs in our country? Maybe. For example, Uwe Reinhardt makes a decent case for Medicare’s pricing system. Anyway, our politicians aren’t notably more craven than those in other countries. If they can do it, so can we. I hope.